united-kingdom-personal-tax-guide

Worldwide Personal Tax and Immigration Guide 2024-25

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United Kingdom ey.com/globaltaxguides

London

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EY 1 More London Place London SE1 2AF England United Kingdom Executive contacts Stephanie King Nicholas Yassukovich

+44 (20) 7197-9217 Email: sking1@uk.ey.com +44 (20) 7951-9517 Email: nyassukovich@uk.ey.com

Social security contacts Graham Wyllie Graham Crouchman Rob Pearce

+44 (20) 7951-3592 Email: graham.wyllie1@uk.ey.com +44 (20) 7951-7160 Email: graham.crouchman@uk.ey.com +44 (118) 921-7926 Email: rob.pearce@uk.ey.com

Immigration contacts Lisa Amos Charlotte Nicolas

+44 (20) 7951-6813 Email: lisa.amos@uk.ey.com +44 (20) 7197-5228 Email: charlotte.nicolas@uk.ey.com

Private Client Services contacts Caspar Noble Neil Morgan Sonia Rai

+44 (20) 7951-1620 Email: cnoble@uk.ey.com +44 (20) 7951-1878 Email: nmorgan1@uk.ey.com +44 (20) 7951-6384 Email: srai1@uk.ey.com

A. Income tax Who is liable. The taxation of individuals in the United Kingdom

(UK) is determined by residence and domicile status. The UK applies a comprehensive statutory residence test (SRT) to determine whether an individual is resident in the UK. The SRT has rules that determine whether someone is one of the following: • Conclusively UK nonresident • Conclusively UK resident • Subject to the “sufficient ties” tests to determine their UK residence status Residents. Tax residents are liable to UK tax on their worldwide income. However, individuals who are regarded as not domiciled in the UK (see Domicile) may not be liable to UK tax on offshore income and capital gains if the funds are not remitted to the UK (this is known as the “remittance basis”). Individuals wanting to be taxed on the remittance basis must, in most cases, make a claim each year. For further details regarding the remittance basis, see Remittance basis.

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Based on announced changes to the UK tax law, remittance basis taxation for non-UK domiciled individuals will be abolished from 6 April 2025 onward; see Note below on changes from 6 April 2025. Nonresidents. Nonresidents are subject to tax on their UK-source income, such as compensation attributable to UK workdays and certain UK-source investment income. Under the SRT, an individual who has been nonresident for UK tax purposes throughout the preceding three UK tax years is generally regarded as conclusively nonresident if he or she spends no more than 45 days in the UK in any UK tax year. Other tests may also apply under which a taxpayer is regarded as conclusively nonresident, the most common of which is the test applying to an individual who meets the conditions for “full-time work abroad” (FTWA) during the tax year, which is defined under the SRT. UK residence. Employees leaving the UK most commonly cease to be UK tax resident by virtue of FTWA. FTWA, as defined under SRT, requires individuals to work for a minimum of 35 hours per week under one or more contracts of employment and/or self-employment (the methodology for calculating the hours per week is set out in the legislation) for the relevant tax year. It also places a limit on the number of days (maximum of 90 per UK tax year) and workdays (maximum of 30 per UK tax year) that an individual may spend in the UK and still be regarded as FTWA for the tax year concerned. It is also possible to be conclusively nonresident by spending no more than a de minimis number of days in the UK in a tax year (15 days if the individual has been resident in any of the previous three tax years and 45 days if he or she has been nonresident throughout that period). Separate automatic nonresidence rules may apply if the taxpayer dies in the tax year. An individual coming to the UK is likely to be regarded as conclusively UK resident if he or she does not meet any conditions to be regarded as conclusively UK nonresident (see above) and satisfies any of the following conditions: • He or she spends at least 183 days in the UK in the UK tax year. • He or she works sufficient hours (at least 35 hours per week on average) in the UK, assessed over a 365-day period, with more than 75% of his or her workdays being UK workdays (full-time working in the UK, or FTWUK). • He or she has his or her only home or all his or her homes in the UK, for a period of at least 91 consecutive days, and at least 30 days of the 91-day period fall in the UK tax year concerned. • He or she meets the sufficient ties test. Particular rules apply to individuals who have relevant jobs in international transport, such as air crew. These rules exclude them from the FTWA and FTWUK tests. For an individual who is neither conclusively resident, nor conclusively nonresident, a sufficient ties test applies under the SRT. The sufficient ties test looks at the number of connection factors (ties) that the individual has with the UK and the number of days spent in the UK. Five possible ties can apply to determine the extent of the individual’s connection to the UK; the more ties that an individual has, the fewer days he or she may spend in the UK

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in a tax year without becoming UK tax resident. The following are the five possible ties that an individual may have: • He or she has a UK substantive employment (at least 40 UK workdays, as defined). • He or she has UK accommodation (as defined). • He or she has more than 90 days present in the UK in either of the preceding two UK tax years. • He or she has UK-resident family (spouse, civil partner or minor children). • He or she has been UK tax resident in any one or more of the three preceding UK tax years and has not spent more days in any single country than he or she has spent in the UK. After the number of ties is determined, this is compared with the number of days of presence in the UK. For example, under the sufficient ties test, an individual who has not been tax resident in the UK in any one of the preceding three tax years does not become a UK resident in the following circumstances: • He or she is present up to 120 days in the UK and has no more than two ties. • He or she is present up to 90 days in the UK and has no more than three ties. Complex statutory definitions apply in all cases. For example, a day is usually counted as a day of presence if the individual is in the UK at midnight, but an additional anti-avoidance rule can also apply if the individual has three UK ties, has been UK tax resident during any of the preceding three UK tax years and has more than 30 days in the UK when he or she is in the UK during the day but absent at midnight (see Days present in the UK). A UK workday is defined as a day on which more than three hours of work is undertaken in the UK and includes both training and traveling undertaken in the performance of employment duties. Overseas workday relief. For UK tax residents who are nondomiciled, overseas workday relief (OWR) may be available on their employment income when they first become resident if they have been nonresident for UK tax purposes throughout the preceding three UK tax years, if the remittance basis is claimed and if the remuneration related to those overseas workdays is both paid and retained offshore (for further details, see Remittance basis). If OWR applies, the income relating to the overseas workdays is excluded from UK taxation so long as it is not brought to the UK. OWR is likely to apply to the UK tax year in which the individual first becomes UK tax resident and to the two subsequent UK tax years. The law does not prevent an individual from being entitled to OWR on several different assignments to the UK. However, unless he or she is nonresident in the UK for at least three full UK tax years between assignments, the period over which relief may be claimed is likely to be restricted. The rules relating to OWR, including transitional rules for individuals eligible for OWR in the 2023-24 and 2024-25 tax years, will be updated from 6 April 2025; see Note below on changes from 6 April 2025. Split-year position. In principle, residence is determined for a tax year as a whole, but under the SRT a taxpayer who is UK tax

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resident may be eligible for split-year treatment in certain circumstances. If the conditions are met, non-UK income and gains of the overseas part of the UK tax year concerned are generally not subject to UK tax. An individual arriving in the UK who would otherwise be UK tax resident all year may qualify for splityear treatment in any of the following five circumstances: • The individual starts to have his or her only home in the UK. • He or she starts to work full time in the UK. • He or she returns from working full time abroad, having been UK tax resident in one or more of the four tax years immediately preceding the previous UK tax year. • He or she is an accompanying spouse or civil partner of someone who is returning from working full time abroad, as described above. • He or she starts to have a home in the UK and did not previously have a UK home. If more than one of the above circumstances applies, an ordering rule typically applies the test that minimizes the overseas part of the tax year and begins taxation as a UK resident from the earliest possible date. In addition, in any of the following three sets of circumstances, someone leaving the UK may qualify for split-year treatment: • The individual leaves the UK for FTWA. • He or she is an accompanying spouse of someone who is leaving the UK for FTWA. • He or she is leaving the UK permanently and will not have a home in the UK after departure. If more than one of the above circumstances applies, the date of the beginning of the overseas part of the tax year is determined in the following order of priority: • FTWA • Accompanying spouse rule • Test based on ceasing to have a UK home Individuals may also need to look at their residence position for the previous and subsequent tax years as part of the split-year conditions. Consequently, professional advice should be obtained if relevant. Domicile. Under English law, an individual’s domicile is the country considered to be his or her permanent home, even though he or she may be currently resident in another country. It may be a domicile of origin, choice or dependency. Under English law, every person is born with a domicile of origin, which is normally that of his or her father. A domicile of origin has great tenacity. Consequently, individuals who were never domiciled in the UK and who work there for limited periods normally will likely be able to demonstrate that they are not domiciled in the UK. Individuals who are non-UK-domiciled are deemed to have a UK domicile for income tax purposes if they have been resident in the UK for at least 15 out of the 20 tax years immediately preceding the current tax year. If an individual with a UK domicile of origin who had acquired a non-UK domicile of choice returns to the UK for a limited period, he or she will be deemed to be domiciled in the UK from the date on which he or she returns.

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Domicile status affects how an individual’s offshore income and/ or capital gains are taxed. A non-UK-domiciled individual can have his or her offshore income and/or offshore capital gains taxed on either of the following bases: • Remittance basis • Arising basis An individual who is taxable on the arising basis is subject to UK tax on his or her worldwide income and capital gains, regardless of where they arise. For further details regarding the remittance basis, see Remittance basis. Days present in the UK. Any day on which the individual is present in the UK at midnight is considered a full day of presence in the UK for residence purposes. Days in transit may be excluded from the count if the individual does not perform any activities in the UK that are unrelated to the transit. In some cases, up to 60 days that were spent in the UK as a result of exceptional circumstances that were not anticipated and were outside the taxpayer’s control may be disregarded in calculating total days of presence. An anti-avoidance rule applies to taxpayers who have three or more ties under the SRT and who were UK tax resident in at least one of the preceding three UK tax years. If an individual spends more than 30 days in the UK on which the individual is not also present in the UK at midnight, each subsequent day spent in the UK (above 30) for which the taxpayer is absent at midnight is counted as a day of UK presence for all of the day-count tests applied under the SRT. However, this anti-avoidance rule does not apply to individuals who meet the criteria for FTWA (see above). Based on announced changes to UK tax law, remittance basis taxation for non-UK domiciled individuals will be abolished from 6 April 2025 onward; see Note below on changes from 6 April 2025. For tax years prior to 6 April 2025 non-UK domiciled but UK resident individuals can claim the remittance basis of taxation. An individual who is taxed on the remittance basis can potentially keep certain of his or her foreign income and gains outside the scope of UK tax by having them paid offshore and not subsequently remitting them to or enjoying them in the UK. “Remittance” is widely defined to include direct and indirect remittances, and professional advice should be taken as necessary to determine when the remittance basis may be claimed. The default position is that nearly all residents are subject to UK tax on worldwide income and gains (known as the “arising basis”). Individuals who qualify and wish to be taxed on the remittance basis must normally claim to be taxed on this basis. Individuals who claim the remittance basis lose the tax-free personal tax allowance for income tax (in any event, this allowance is subject to phaseout for individuals with income in excess of GBP100,000 in the tax year; see Personal allowance) and also lose the annual exemption for capital gains tax (CGT) for that tax year. In addition, individuals who have been resident in at least seven of the preceding nine UK tax years must pay an additional remittance basis charge (RBC) of GBP30,000 for each year for which the claim to be taxed on the remittance basis is made. The

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charge is increased to GBP60,000 for individuals who have been resident in the UK in at least 12 of the preceding 14 UK tax years. Individuals resident in the UK in at least 15 of the preceding 20 UK tax years are no longer able to access the remittance basis. However, the remittance basis currently applies without a formal claim if non-domiciled residents satisfy the following de minimis conditions: • Their total unremitted offshore income and gains in the UK tax year amount to less than GBP2,000 (if a taxpayer is eligible for split-year treatment, this limit applies to the UK-resident part of the tax year only, so that any unremitted offshore income and gains for the overseas part of the tax year are ignored; only income and gains related to the UK part of the split tax year count toward the GBP2,000 limit). • They have not made any remittances of “relevant income or gains” to the UK, have been resident in the UK in no more than six out of the preceding nine UK tax years (or they are under 18 throughout the tax year), and their only UK-source income is investment income that has been taxed at source of no more than GBP100. “Relevant income or gains” are the individual’s foreign income and gains for that tax year as well as foreign income and gains for every previous tax year to which the remittance basis applied. If the remittance basis applies without a formal claim, the individual does not lose the tax-free personal tax allowance for income tax (assuming his or her gross income is below the phaseout level; see Personal allowance) or the annual exemption for CGT for that tax year. Income and gains that may be taxed on the remittance basis include the following: • Earnings paid outside the UK and attributable to workdays outside the UK if the individuals are eligible to claim OWR (see Overseas workday relief) • Earnings from a separate employment with a non-UK-resident employer if the duties are performed wholly outside the UK (however, under an anti-avoidance law, remuneration from many such contracts are typically taxed on the arising basis instead) • Most common forms of investment income arising from assets or funds based outside the UK • Capital gains arising from the disposal of assets located outside the UK Organizing bank accounts. If the remittance basis applies, special rules identify the source of funds remitted to the UK in a specific order from a “mixed fund.” A “mixed fund” is a fund that contains monies from different sources, such as employment income, investment income, capital gains and “clean capital,” or income or gains of more than one UK tax year. If monies are remitted to the UK, the following order applies in determining what has been brought to the UK: • Employment income that has already been taxed in the UK • General foreign earnings (for example, earnings relating to overseas workdays) that have not been subject to foreign taxes

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• Specific foreign employment income (such as income derived from certain share incentives) that has not been subject to foreign taxes • Foreign-investment income that has not been subject to foreign tax • Foreign chargeable gains that have not been subject to foreign tax • Employment income that has been subject to foreign tax • Foreign-investment income that has been subject to foreign tax • Foreign chargeable gains that have been subject to foreign tax • Income or capital (including income or capital already taxed in the UK) not contained in the above categories, including underlying capital, such as pre-residence earnings, investment income and capital gains If possible, offshore accounts containing segregated funds (for example a separate account to hold proceeds from the disposal of assets chargeable to CGT) should be organized to avoid the complications of the mixed fund rules. A taxpayer can nominate a particular offshore account that meets certain conditions to be a “qualifying mixed fund account,” which simplifies the calculation of OWR. To qualify, the types of income that the account may contain are restricted. Although the account may be held in joint names, only one of the account holders may contribute to it. Accounts that do not contain current year employment income that is a mixture of UK-source earnings and earnings that are eligible for OWR are not eligible for nomination. A taxpayer may have only one nominated bank account at one time and details of that nominated account must be provided to HMRC. For most bank accounts, an analysis of what has been brought to the UK with each remittance must be made on a transactionby-transaction basis. For nominated bank accounts only, the analysis may be undertaken at the end of the UK tax year on the basis of cumulative figures for the year if all of the necessary conditions are met. As a result of the complexities of the remittance basis and the mixed fund rules, and the potential interaction with double tax treaties, professional advice should be sought from the outset. Note on changes from 6 April 2025. The UK government

announced a major reform to the taxation of non-domiciled individuals in the budget delivered on 30 October 2024, which will take effect from 6 April 2025. It represents significant changes to the way globally mobile employees are taxed in that it abolishes the remittance basis of taxation, which was largely dependent on domicile status, and brings in a residence-based system (although income relating to pre-6 April 2025 remains subject to the remittance basis). As a high-level overview, the following are key aspects of the new regime: • “Qualifying new residents” (QNRs) will not pay UK tax on foreign income and gains (FIG) arising in the first four tax years after becoming UK tax resident, provided they have not been UK tax resident in any of the previous 10 consecutive tax

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years. They will be able to bring the FIG to the UK free from additional income and capital gains tax. • QNRs will be taxable on worldwide income after four tax years of UK residence. • OWR will be available for the four tax years (the year that the individual becomes resident and next three tax years). The relief will apply to employment income for non-UK workdays. The employment income will no longer have to be paid and kept overseas. The relief will be restricted to the lower of 30% of qualifying employment income and GBP300,000. Sharebased incentives will be included in qualifying employment income when calculating the cap. The reliefs under the FIG regime and OWR from 2025-26 need to be specifically claimed in a self-assessment tax return. There are also transitional provisions and reliefs available for individuals who have been taxed on the remittance basis before 6 April 2025, including the following: • OWR will be available up to four tax years for individuals who are eligible for the FIG regime, unless they have already had OWR for three tax years (that is, individuals who became resident in 2022-23), in which case OWR will no longer be available. • The Temporary Repatriation Facility (TRF) is expected to be available in 2025-26, 2026-27 and 2027-28 for individuals who have previously claimed the remittance basis. The proposal is that they will be able to designate unremitted FIG that arose prior to 6 April 2025 (including unremitted income that qualified for OWR) and pay a reduced rate of tax on the designated FIG. Tax is paid for the year that the designation is made, but the remittance can be in a later year. The proposed tax rate applicable on designated FIG will be 12% for 2025-26 and 2026-27, increasing to 15% for 2027-28. The Chancellor has said that some changes will be made to this proposal but the exact details have not been published. • Current and past remittance basis users are also expected to be able to rebase foreign capital assets to their value at 5 April 2017 when they dispose of them. Income subject to tax. The taxation of various types of income is

described below.

Employment income. An employee is prima facie taxed on all remuneration and benefits from employment received during a tax year. The UK tax year ends on 5 April. An employee is taxable not only on basic salary but also on most perquisites or benefits in kind, including company cars, meals, accommodation, tuition for dependent children, medical insurance premiums and imputed interest on loans below market rates. Employer-paid education expenses for employees and life insurance premiums may be taxable in certain circumstances. Education allowances provided by employers to their expatriate and local employees’ children are chargeable to income tax and social security. However, contributions by an employer to a UK-registered pension scheme are normally not taxed if prescribed limits are not exceeded (see Pensions). All salaries, fees and benefits in kind earned by directors are taxable as employment income. Individuals who are resident are taxed

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on their worldwide employment income. However, for UK tax years before 6 April 2025, non-UK-domiciled individuals may be taxed on the remittance basis if they elect to be taxed on the remittance basis or if the remittance basis applies without a claim (see Remittance basis). As a result, remuneration for duties performed outside the UK, such as income relating to overseas workdays, may potentially escape UK tax altogether if it is paid offshore and not subsequently remitted to or enjoyed in the UK. However, as explained above, OWR is only normally available for the UK tax year in which tax residence is established and the two subsequent UK tax years. Earnings derived by non-UK-domiciled individuals from UK duties are taxable in the UK regardless of whether the arising or remittance basis applies. Remuneration from certain specific employment contracts for non-domiciled individuals with non-UK employers under which no duties of the employment are performed in the UK may also be taxable on the remittance basis, but additional conditions must be met, which means that income from such contracts may be taxable as it arises. Individuals who are resident are taxed on their employment income for the year. However, some individuals may qualify for “split-year” treatment under which the employment income relating to periods before and after their UK employment and assignment can be excluded from UK taxation if certain conditions are met (see Split-year position). Individuals who are nonresident in the UK are taxed on their earnings from UK employment duties only. If employment income that is earned during a period of UK residence is paid when the individual is nonresident, the employment income remains taxable as though the individual is resident. It is the resident status of the employee when the individual earns the income that determines the taxability of the earnings and not the residence status of the employee at the time of payment unless HMRC has specifically agreed to the use of an alternative “cash basis” for tax-equalized employees. If all of the conditions are satisfied, a double tax treaty may grant an exemption to exclude certain types of employment income from UK taxation for employees who are resident in another contracting state for the purpose of the treaty (see Section E). Tax is normally deducted from employment income at source under the Pay-As-You-Earn (PAYE) system (see Section D). Self-employment income. Self-employment income includes income from a trade, profession or vocation. Whether a person is considered to be employed or self-employed is determined by the individual’s particular circumstances and as a matter of fact. Tax is charged on the profits or gains of trades, professions and vocations carried out wholly or partly in the UK by UK residents. A nonresident individual is charged on any business exercised in the UK, or on the part of the trade carried on in the UK if the trade is carried on partly in the UK and partly overseas. A business carried out wholly overseas by a UK-resident individual is regarded as foreign income and, consequently, may be taxed on

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the remittance basis if the individual is eligible and claims the remittance basis. For tax purposes, profits are usually determined in accordance with normal accounting principles, but adjustments may be necessary. A self-assessment system applies, and self-employed individuals are currently taxed on the business profits earned during an accounting period ending in the current tax year. From 2024-25, self-employed individuals will be taxed on the profits generated between the start (6 April) and end of the tax year (5 April). A GBP1,000 trading allowance is available. If the allowance covers all the trading income before expenses, the income is not taxable and not reportable. If this is not the case, the individual has the option of deducting his or her expenses or using the allowance. The allowance cannot be claimed by partnerships and cannot be claimed if rent-a-room relief is claimed. It is proposed that, from 6 April 2026, self-employed individuals will be required to keep records of self-employment income and expenses digitally and report the details to HMRC on a quarterly basis if the income is over GBP50,000. Investment income. Taxpayers are entitled to a dividend allowance of up to GBP500 (GBP2,000 before 6 April 2023, GBP1,000 before 6 April 2024), so that up to the first GBP500 of dividend income received in the tax year is effectively taxed at 0%. For dividends in excess of the allowance, the following rates apply: • 8.75% for basic rate taxpayers • 33.75% for higher rate taxpayers • 39.35% for additional rate taxpayers Although the first GBP500 of dividend income is tax-free, it is still taken into account in determining the taxpayer’s marginal tax rate and any entitlement to the personal savings allowance, as explained below. A new personal savings allowance applies for other investment income such as bank interest. UK banks and building societies are no longer required to deduct basic rate tax at source from any interest income paid by them. The personal savings allowance is set at GBP1,000 for basic rate taxpayers and GBP500 for higher rate taxpayers. It is not a deduction from taxable income, but it is effectively an amount of savings income that may be taxed at 0%. Additional rate taxpayers (individuals with taxable income in excess of GBP125,140) are not entitled to a savings allowance. Investment income in excess of the savings allowance is subject to income tax at the taxpayer’s marginal tax rate. See Rates for further details. Any income from UK leased property is taxed as income at the applicable marginal rate of the taxpayer (see Rates). Leasing agents for nonresident landlords should withhold the basic tax rate of 20%, unless HMRC issues a direction to them authorizing gross payment to the landlord. Income tax on property income is

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charged on the net profit from rentals after deduction of qualifying expenses, such as repairs and maintenance but not depreciation, which is not a qualifying expense for UK tax purposes. Relief for mortgage interest is limited to relief at the basic rate of tax. The net profit is calculated in accordance with UK rules even if the rental income arises from foreign leased property and is taxed on the remittance basis. A deduction may be claimed instead for actual expenditure on replacement of furniture and fittings used in a property income business. It is proposed that, from 6 April 2026, records of property income and expenses will have to be kept digitally and reported quarterly if the income is over GBP50,000. A GBP1,000 property allowance is available. If the allowance covers all the property income before expenses, the income is not taxable and not reportable. If this is not the case, the individual has the choice of deducting his or her expenses or the allowance. UK domiciled and resident individuals are usually liable to UK tax on their worldwide investment income. Nonresident individuals are liable to UK tax on their investment income from UK sources only, regardless of their domicile status. For UK tax years before 6 April 2025, individuals who are not domiciled but are resident in the UK are also usually liable to UK tax on investment income from UK sources. However, they may claim to have their investment income from any non-UK-source income taxed on the remittance basis so that they are taxed on their investment income from any non-UK sources only to the extent that it is remitted to or enjoyed in the UK. If all the conditions are satisfied, a double tax treaty may grant an exemption to exclude certain types of investment income from UK taxation for individuals who are resident in the other contracting state for purposes of the treaty (see Section E). Stock options and share-based incentive schemes. Detailed, com-

plicated legislation applies to the taxation of share incentives provided to employees by their employers. The legislation applies to “securities,” which includes, but is not limited to, shares in the employer company. The application depends on the specific plan rules. As a result, professional advice should be taken on the tax and legal implications in any particular case. The following discussion is for general guidance only. The UK introduced reforms of the law that governs the taxation of certain equity-based compensation for internationally mobile employees, which took effect on 6 April 2015. This regime applies to all chargeable events, including awards vesting or being exercised, occurring on or after 6 April 2015 and generally seeks to tax the proportion of any award attributable to periods of UK tax residence, together with any amounts attributable to UK work during periods of nonresidence. The regime described below applies to all awards if the taxable event occurs on or after 6 April 2015, regardless of the original date of grant.

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Unapproved employee share option schemes and restricted stock units. Unapproved employee share options are not taxed on grant, but when the chargeable event occurs. This is usually when the option is exercised but may include other events, such as the settlement in cash of the option by the employer, rather than the exercise of the option to acquire shares. Any rights to acquire securities are now likely to be taxed as employment-related securities options on exercise of the option or, for other rights to acquire, such as restricted stock units, when the employee becomes entitled to the award. The UK taxable proportion of the award is calculated by allocating the award to the UK tax years over which it was earned and apportioning the income by tax year between UK and non-UK elements. Any parts that are not attributable either to periods of UK residence or to UK workdays are excluded from UK taxation. If employees are entitled to OWR, they may also be eligible for a form of OWR with respect to their overseas workdays during UK-resident periods. It may also be possible to rely on a double tax treaty to limit the UK’s right to tax amounts attributable to non-UK duties if the employee is treaty nonresident in the UK at the time of the chargeable event. From 6 April 2025, OWR is expected to be restricted to the lower of 30% of qualifying employment income and GBP300,000. Share-based incentives will be included in qualifying employment income when calculating the cap. The employer must withhold income tax on chargeable events, such as exercise, if the underlying securities are considered to be Readily Convertible Assets for UK tax purposes, via the PAYE system. The social security position is more complex. However, if relevant and for employees who are within the scope of UK social security, it is possible for employers to enter into agreements with their employees to pass on the secondary (or employer’s) social security liability to the employee. Under the agreement, the employee pays any employer-owed social security contributions due on the exercise of the option; the employee may then deduct the contributions paid when calculating the amount of the gain liable to UK income tax. If awards of shares are made, rather than share options, the value of the shares awarded to an employee is usually subject to income tax and social security contributions (if applicable) on the date of the award. The position may be more complex if shares are restricted, such as being at risk of forfeiture. If shares are at risk of forfeiture, the liability is usually deferred until the restrictions lift, assuming this happens within five years of the grant. Employers and employees can instead jointly make elections so that the taxes on the award are charged up front on the value ignoring the restrictions. This is an extremely complex area, and professional advice should be obtained in all cases. For the purpose of any treaty apportionment, share-option income is typically sourced from grant to vesting, assuming that the individual remains in employment with a group company throughout this period. By exception, the UK continues to apply

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a grant-to-exercise sourcing period for gains under its treaties with Japan and the United States. In all the above cases, the law is complex, and professional advice should be obtained. An apprenticeship levy is also potentially payable. See Apprentice levy in Section B. Tax-advantaged employee share schemes. The UK currently has several employee share schemes that can have tax-advantaged status. Income from tax-advantaged schemes that is realized in an approved manner is usually not subject to income tax or to National Insurance contributions. Tax-advantaged plans include, among others, the Company Share Option Plan (CSOP), the Save As You Earn (SAYE) Share Option Scheme, the Share Incentive Plan (SIP; formerly the All Employee Share Ownership Plan) and the Enterprise Management Incentives (EMI). Each plan has different characteristics and is consequently relevant to particular employer and employee circumstances. The difference between tax-advantaged employee share schemes and unapproved schemes is that the former generally put shares into the hands of employees free of income tax and National Insurance. A disadvantage of the tax-advantaged employee share scheme is that the value of awards that may be made to employees is limited. CGT on employee share schemes. CGT may be due if the shares acquired from employee share schemes are sold and if the employee is within scope of CGT at the time (broadly, if he or she is resident or only temporarily nonresident). In general, the underlying shares acquired from tax-advantaged schemes are still subject to capital gains tax when they are sold. However, shares in a Share Incentive Plan subject to a minimum holding period may be exempt from UK CGT on disposal. For shares acquired from the exercise of options, the base cost of the shares sold for UK capital gains tax purposes is increased by the amount of any income that was subject to UK income tax at exercise. More complex base cost rules apply if employees hold shares acquired by them on different dates at different prices. The employer does not have any withholding obligation with respect to CGT. Annual filing. Any plans under which awards of securities are made to employees should be registered with HMRC by the relevant employer. Annual reports must also be filed by 6 July following the end of the relevant UK tax year (for example, by 6 July 2025 for the 2024-25 tax year) to report all reportable events: in the UK tax year, including, but not limited to, the acquisition of shares or the exercise of share options. It is noteworthy that nil returns must be filed if awards remain outstanding, but no reportable events occur in the year. Plans must be deregistered once completed. Pensions. In terms of UK tax treatment, pension schemes may

broadly be divided into the following three groups: • UK registered pension plans and international equivalents • Unapproved (for UK-tax) pension schemes • Wholly unfunded schemes

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UK-registered plans. The annual allowance charge applies to restrict the tax relief available if the contributions or increase in accrual in a tax year exceeds the permitted annual allowance. Pension inputs are determined for a defined contribution scheme by adding together any employer and employee contributions and, for a defined benefit scheme, by multiplying the inflationadjusted increase in the accrued annual pension value over the course of the tax year by a factor of 16 (plus the increase in any separate lump-sum entitlement) to arrive at the value by which the fund is deemed to have increased over that period. The total of the pension inputs to all relevant pension schemes for a particular individual is measured against his or her annual allowance for the relevant tax year, and any excess is subject to an annual allowance charge at his or her marginal income tax rate. For the 2024-25 tax year, the annual allowance is GBP60,000. A further restriction applies so that for most persons with UK taxable income and pension inputs (as adjusted) of at least GBP260,000, the annual allowance is reduced by GBP1 for every GBP2 over the income limit, subject to a minimum allowance of GBP10,000. Therefore, the minimum annual allowance is currently GBP10,000. There have been fluctuations in these allowances and limits since the introduction of the tapered annual allowance on 6 April 2016. Any unused annual allowances from the preceding three UK tax years may be carried forward to offset any excess pension inputs in the current tax year. Before 6 April 2023, the lifetime allowance placed a limit on the tax-relieved pension savings an individual could make over their lifetime and a tax charge applied on withdrawal if the limit was exceeded. The UK Spring Budget 2023 removed the lifetime allowance tax charge from the 2023-24 tax year onward. Although the charge was abolished, the concept of lifetime allowance remained for the 2023-24 tax year. With effect from 6 April 2023, the lifetime allowance tax charge was replaced with a charge to income tax at the individual’s marginal rate for certain lump-sum payments (also referred to as “relevant lump sums”) paid by registered pension schemes, which would otherwise have been subject to a lifetime allowance charge. The concept of the lifetime allowance was removed completely from 6 April 2024 and replaced with two new allowances, which are the “lump-sum allowance” and the “lump-sum and deathbenefit allowance.” The standard amount for the lump-sum allowance is set at GBP268,275. This limits the UK tax-free sums that can be taken as pension-commencement lump sum and/or the tax-free portion of any uncrystallized funds pension lump sums. The standard lump-sum and death-benefit allowance is fixed at GBP1,073,100 (equivalent to the previous lifetime allowance limit). This sets the limit for the total UK tax-free amount that can be withdrawn over an individual’s lifetime and on death (certain lump sums paid on the death of individuals aged under 75 can be paid tax-free). Sums over the allowance are taxed at the recipient’s marginal tax rate. Various transitional rules apply to certain individuals who may have available allowances higher than the standard allowances.

U n i te d K i n g d o m 1627

International equivalents. Non-UK schemes that the UK law regards as being like a UK scheme are subject to a similar regime to the one described above, but with slightly different rules. The following four types of schemes may fall within this group: • Schemes for which Migrant Member Relief (MMR) has been claimed. • Schemes for which transitional corresponding acceptance (TCR) has been claimed. • Schemes for which tax relief on contributions has been claimed under an appropriate double tax treaty. • Overseas pension schemes (as defined) with employer contributions that are not taxable on the employee because the scheme provides only death and retirement benefits. In very broad terms, an overseas pension scheme is usually one that is subject to a system of regulation and tax recognition in the country in which it is established and that is open to local residents in that country. For schemes for which relief is available under MMR, TCR or a double tax treaty, employer contributions are also usually deductible for corporation tax purposes. However, for the employee personally, UK tax relief for total pension inputs are subject to the limits described above. In addition, UK tax charges may apply if, after leaving the UK, an individual takes benefits from a UK tax-relieved pension scheme having been non-UK resident for a period of fewer than 10 complete UK tax years (or five complete UK tax years in the case of funds for which UK relief was claimed before 6 April 2017). If benefits are taken from his or her pension scheme in a form that would not be permitted for a UK-registered pension scheme (including taking any form of loan or making a transfer to another non-UK scheme that is not a qualifying scheme for UK tax purposes), a 55% unauthorized payment charge applies to an amount up to the amount of the total UK tax-relieved funds in the scheme. Other pension schemes. Other schemes that are not UK-registered schemes and that are not schemes to which any of the reliefs for international equivalents are available are typically subject to tax under the UK’s “disguised remuneration” regime, unless they can be shown to be wholly unfunded. This usually means that if any contributions made to such a scheme are with respect to, or otherwise earmarked for, an employee, the employee must be taxed on the contributions through PAYE at the time of contribution. For a funded defined benefit scheme, the employee is taxed on the value of the accrued benefit (unless the scheme provides only death and retirement benefits), but normally this tax charge is not subject to PAYE withholding. Wholly unfunded schemes. Wholly unfunded schemes are usually outside the disguised remuneration rules but there are certain anti-avoidance provisions that could apply depending on the specifics of the scheme. It is noteworthy that an extended definition of funding for this purpose is provided. Under this definition, if, for example, the employer provides an asset as security for the scheme or if the employer makes any form of promise or undertaking to provide funding to a third party in the future, this is subject to UK tax, with PAYE withholding, in the same way as if the scheme was funded immediately.

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Benefits paid from pension schemes for which an employee has had contributions or has accrued entitlement during a period when he or she was a UK resident or was performing duties in the UK is likely to be subject to UK tax, often with a corresponding PAYE withholding obligation for the employer or UK host employer. These UK tax charges might be blocked by the pensions article of a double tax treaty in some cases, but this does not automatically remove the employer’s PAYE withholding obligation unless the pension scheme member obtains clearance in advance from the UK tax authorities. The law with respect to pension schemes in the UK is extremely complex. As a result, specific advice should be obtained in all cases. Capital gains tax. An individual who is resident and domiciled or

deemed to be domiciled in the UK is taxed on gains arising on disposals of assets located anywhere in the world. However, an individual who is resident but not domiciled in the UK and who elects to be taxed on the remittance basis for that year is taxed on disposals of overseas assets only if the proceeds are remitted to the UK (see Remittance basis in Section A). In this case, the gain element of the sale proceeds is regarded as being remitted ahead of the capital. All individuals who are subject to UK capital gains tax (CGT) are entitled to an annual CGT exemption, but this is lost if the remittance basis is claimed. From 6 April 2025, the government has proposed abolishing the current regime applying to non-UK domiciled individuals and replacing it with a new “4-year FIG regime.” An individual can elect to be taxed under this new regime, provided they have been non-UK tax resident for a consecutive period of 10 UK tax years. Broadly, under the new regime, for the first four years of UK residence, gains arising on disposals of overseas assets are not subject to CGT in the UK, regardless of whether the proceeds are remitted to the UK or retained overseas. When a UK resident disposes of UK land and a CGT liability arises, a return should be made and the CGT tax paid within 60 days after completion of the disposal. An individual who is nonresident is not normally subject to UK CGT (however, see Years of departure and arrival, and temporary nonresidence rule and Disposal of UK residential property by nonresidents). Years of departure and arrival, and temporary nonresidence rule. Individuals who leave the UK during the year, who are considered resident before departure and who qualify for split-year treatment under the SRT are not normally chargeable to CGT on gains realized in the nonresident part of the tax year. However, individuals who, on departure, had been resident in the UK for four out of seven of the preceding UK tax years remain subject to “temporary nonresidence” rules if their period of absence from the UK does not last for at least five years. If the temporary nonresidence rules apply, gains arising on the disposal of assets owned before the period of temporary nonresidence that are sold during the period of temporary nonresidence

U n i te d K i n g d o m 1629

are subject to CGT in the UK tax year in which the taxpayer returns to the UK and resumes tax residence (year of arrival). Gains on the disposal of assets acquired in a period of nonresidence and sold while the individual is still nonresident are not subject to UK CGT. Likewise, individuals who arrive in the UK during the year, who are considered resident, who are eligible for split-year treatment and who are not subject to temporary nonresidence rules are normally taxed only on gains realized after the date on which they are treated as becoming UK tax resident under the split-year provisions. Reliefs. Various reliefs are available for CGT. The most common relief is main residence relief, which exempts all or part of a gain that arises on a property that an individual has used as his only or main home, if certain conditions are met. Business Asset Disposal Relief is a relief available to taxpayers who sell or give away their businesses. This relief aims to reduce the rate of CGT on qualifying disposals to 10%. Gains are eligible for Business Asset Disposal Relief up to a maximum lifetime limit, which is currently GBP1 million. Many other reliefs are available, including rollover relief for disposals of certain business assets. Foreign currency. Foreign currency is generally a chargeable asset for CGT purposes unless it is acquired for specific personal use outside the UK. However, currency gains on cash balances held in a non-sterling bank account are also specifically excluded from CGT if such funds are retained for personal use only. Annual exempt amount. The annual exempt amount for the 2023-24 tax year is GBP3,000. This exemption is forfeited if a claim for the remittance basis is made for the tax year. Rates. The rates for the 2024-25 tax year are provided below. The following are the rates from 6 April 2024 to 30 October 2024. Regular Residential property Carried interest

Basic rate (%)(a)

Higher rate (%)(b)

10 18 18

20 24 28

(a) The rate applies to chargeable gains that fall within the individual’s basic rate band limit, after taking into account income as calculated for income tax purposes. (b) This rate applies to chargeable gains in excess of the basic rate band.

The following are the rates from 30 October 2024 to 5 April 2025. Regular Residential property Carried interest

Basic rate (%)(a)

Higher rate (%)(b)

18 18 18

24 24 28

(a) The rate applies to chargeable gains that fall within the individual’s basic rate band limit, after taking into account income as calculated for income tax purposes. (b) This rate applies to chargeable gains in excess of the basic rate band.

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Capital losses. Capital losses can be automatically deducted from capital gains in the same year. Any allowable unused capital losses may be carried forward indefinitely to relieve future gains. Losses realized by non-domiciled taxpayers who have claimed the remittance basis are not normally regarded as capital losses except in the circumstances discussed below. For individuals who elect to be taxed on the remittance basis, capital losses from the disposal of assets not located in the UK cannot be offset against chargeable gains in the UK, unless they make an election. The election potentially allows individuals to claim relief for capital losses on the disposal of any assets not located in the UK. However, the election would require them to track and possibly disclose the details of their worldwide capital transactions to HMRC. Any losses from the disposal of assets located in the UK are first offset against any unremitted foreign gains in preference to any UK gains, thereby increasing the amount of UK CGT payable. As a result, this election might not be beneficial if an individual has significant UK gains and losses. The election must be made with respect to the first tax year in which individuals are claiming the remittance basis of taxation (the election can be made up to four years after the end of the tax year the remittance basis is first claimed), regardless of whether they have any capital losses arising in that year. The election is irrevocable after it is made. Disposal of UK property by nonresidents. Effective from April

2015, the UK government introduced nonresident Capital Gains Tax (NRCGT) to bring nonresidents into the charge of CGT on gains made on the disposal of UK residential property. From April 2019, the UK government has widened the scope of NRCGT to bring nonresidents into the charge of UK CGT on gains made on the direct or indirect disposal of UK immovable property. Direct disposals. From April 2019, direct disposals of UK land and buildings are subject to UK CGT, regardless of the type of the property or the residence of the disposing individual. For nonresidential property, the property is rebased to market value at 6 April 2019, meaning that only the change in value from that date onward will be subject to UK tax. Nonresidents also have the option to use original cost rather than the April 2019 value if this results in a more favorable outcome. Sales of residential property do not benefit from a rebasing in April 2019; however, a further election is available to calculate the taxable gain on a proportionate basis. Indirect disposals. In addition, indirect disposals of UK land are subject to UK CGT if the disposal is of an entity that is considered “property rich” and if the nonresident owner holds or has held at least a 25% interest in that entity at some point within the two years prior to the sale of the entity. For all indirect disposals of “property rich” entities, the value of shares is rebased to the April 2019 market value. For these purposes, an entity is considered “property rich” if, at the time of disposal, 75% or more of the value of the entity being

U n i te d K i n g d o m 1631

disposed of is directly or indirectly derived from UK land. The 75% test is based on the market value of the underlying assets held by the entity at the time of its disposal. The rules only bring nonresidents into the scope of UK tax if they hold or have held an interest of 25% or greater in the “property rich entity.” The holdings of connected parties or parties “acting together” need to be considered in determining whether the 25% test is met. Disposals with an appropriate connection to a collective investment vehicle (potentially including limited partnerships, unit trusts and UK real estate investment trusts) do not benefit from the 25% ownership test such that even a disposal of a small percentage holding would fall within the rules. Generally, taxing rights on disposal of UK real estate are allocated to the UK under most double tax treaties. However, certain double tax treaties include an exemption for disposals of listed shares while others provide wider exemptions. Compliance. Individuals will need to file an NRCGT return and settle any tax due within 60 days after the disposal. Penalties for late filing and late payment apply. Professional advice should be taken as necessary. Deductions

Deductible expenses. Under general rules, a deduction in determining taxable earnings is allowed for any amount if it is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. The rule relating to what is regarded as “necessary” in the performance of the duties of employment is very tightly drawn. Special rules relate to various items, including, but not limited to, travel and subsistence, relocation and overseas medical costs. The following are the common types of deductions and exemptions: • Travel and subsistence costs incurred when an employee works at a temporary workplace (that is, a workplace where an employee expects to work for no longer than 24 months and such period does not form all or nearly all the employment period) • The cost of employee and family return trips home (subject to certain limitations with respect to the duration of claim and family trips; for UK tax years before 6 April 2025, a non-UKdomiciled individual who performs employment duties in the UK is eligible to claim home-leave expenses with respect to his or her family for qualifying journeys that are completed within five years of the date of his or her arrival in the UK) • Qualifying relocation expenses of up to GBP8,000 • Work-related training (for employees only) • Professional subscriptions • Business mileage allowance for using an employee’s private car to travel in the performance of employment duties • Overseas medical costs (for UK employees on foreign assignment) Certain conditions may need to be satisfied before the above expenses can be claimed as deductions. As a result, professional advice should be sought before making these claims. Personal allowance. UK-resident taxpayers are normally entitled to an annual tax-free personal allowance. The amount is

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GBP12,570 for the 2024-25 tax year. Each individual has his or her own personal allowance. In addition, if an individual is tax resident for only part of the UK tax year, he or she will nevertheless receive his or her full annual tax-free personal allowance. However, effective from 6 April 2010, the personal allowance is reduced by GBP1 for every GBP2 of “adjusted net income” over GBP100,000. Consequently, individuals with “adjusted net income” of GBP125,140 or more do not receive any personal allowance for the 2024-25 tax year. In addition, as mentioned in Remittance basis, an individual who claims the remittance basis loses his or her personal allowance unless the remittance basis applies without a claim. In this circumstance, the personal allowance may, in some cases, be reinstated as a result of the specific provisions of a double tax treaty (see Section E), but typically remains subject to the phaseout because of income levels. Not all treaties contain the necessary provisions. Consequently, professional advice should be sought if an individual is considering this option. Nonresident individuals are generally entitled to a UK personal allowance (subject to the same income phaseout) if they satisfy either of the following conditions: • They are nationals of the UK or a member country of the European Economic Area (EEA) • They are entitled to the allowance under specific double tax treaty provisions that cover personal allowances. People born before 6 April 1948 may be entitled to a larger personal allowance. Married couples also qualify for the married couple’s allowance if one or both of the spouses were born before 6 April 1935. The maximum amount of this allowance is GBP11,080, depending on the taxpayers’ age and income. This relief may be taken only at a rate of 10%. In some circumstances, married couples who pay tax at no more than the basic rate may also be able to transfer the unused personal allowance to their spouse or civil partner. Relief for alimony and maintenance payments may be available if an individual or his or her ex-spouse was born before 6 April 1935 and if certain other conditions are met. Business deductions. Expenses incurred for a trade, profession or vocation are generally only available as deductions in determining taxable profit or allowable loss if they are incurred wholly and exclusively for the purpose of the trade, profession or vocation. In addition, certain types of expenses are not allowed as deductions. These include the following: • Entertainment and gifts (except for certain inexpensive gifts bearing conspicuous advertising) • Depreciation, other than capital allowances • Nonbusiness expenses or the private-use proportion of expenses • Costs of a capital nature • Profits or capital withdrawn from the business Although deductions for depreciation and expenditure of a capital nature are not allowed, deductions in the form of capital allowances (tax depreciation) may be available.

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It is proposed that, from 6 April 2026, self-employed individuals will be required to keep details of income and expenses digitally. They will also be required to file details of income and expenses quarterly if the income is over GBP50,000. Rates. The income tax rates for the 2024-25 tax year are shown

below (note separate rates and thresholds for Scotland). The 2018-2019 tax year was the first year that the Scottish Parliament used its powers to impose different rates and thresholds from the rest of the UK. Taxable income GBP

UK, excluding Scotland Tax rate Tax due Cumulative tax due % GBP GBP

First 37,700 Next 87,440 Above 125,140

20 40 45

7,540 34,976 —

Taxable income GBP

Tax rate %

Scotland Tax due GBP

First 2,306 Next 11,685 Next 17,101 Next 31,338 Next 50,140 Above 125,140

19 20 21 42 45 48

438.14 2,337.00 3,591.21 13,161.96 22,563.00 —

7,540 42,516 — Cumulative tax due GBP

438.14 2,775.14 6,366.35 19,528.31 42,091.31 —

From 6 April 2019, the Welsh Assembly can set part of the income tax rate. The current rates for Welsh taxpayers are the same as the UK excluding Scotland rates shown above. Relief for losses. The most common types of losses are trading

losses, property losses and capital losses.

Trading losses. Trading losses may be offset against a taxpayer’s total taxable income. The taxpayer may choose to offset the loss in the year in which the loss is incurred and/or in the preceding year. If the current year loss cannot be fully offset against the current or preceding year trading income, the balance can be used to offset capital gains for that year (after the current year capital loss has been used). For married couples, losses may be offset only against the income of the spouse incurring the loss. Special rules provide for the carryback of losses incurred in early trading years. In addition, a taxpayer may carry forward unused trading losses to offset future income from the same trade. Special rules apply at the cessation of an individual’s trade or business. Property losses. If an individual has more than one rental property, all profits and losses from properties that are leased commercially in the tax year are pooled together to give an overall profit or loss for the year. Special rules can apply to properties leased at less than a commercial rent and to furnished holiday leases. Typically, other property losses can be carried forward and offset against property income from a UK property business in future tax years. A property loss may not be carried back to a previous tax year. Capital losses. For details regarding capital losses, see Capital gains tax.

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B. Other taxes Taxes on property

Real estate transfer taxes. The UK levies various real estate transfer taxes on transactions involving the acquisition of any estate, interest, right or power in or over land in the UK and certain partnerships that hold UK real estate. The real estate transfer taxes cover the following: • Real estate situated in England and Northern Ireland is subject to stamp duty land tax (SDLT). • Real estate situated in Scotland is subject to land and building transaction tax (LBTT), which is effective from 1 April 2015 (prior to this date, SDLT applied). • Real estate situated in Wales is subject to land transaction tax (LTT), which is effective from 1 April 2018 (prior to this date, SDLT applied). Although these taxes are similar, differences exist, most notably to the rates and bands. In all cases, the tax rate depends on whether the property is residential (used or suitable for residential use or in the process of being constructed or adapted for residential use) or commercial or mixed use, with higher rates applying to residential property. The standard rates are up to 15% for residential property (the rate depends, broadly, on where the property is situated, the profile of the buyer and various other circumstances of the transaction). For nonresidential or mixed property, the rates are up to 6% (the rate depends, broadly, on where the property is situated). From 1 April 2016 to 30 October 2024, an additional 3% surcharge (6% in Scotland 4% in and Wales) applies to the purchase of residential property if the purchaser is a company or if the purchaser is an individual who, broadly, already holds residential property (either themselves, their spouse or dependent children) unless they are replacing their main residence. The provisions in this respect are complicated so additional advice should be sought in these circumstances. From 31 October 2024, the surcharge is increased to 5% (Scotland and Wales have retained their surcharge rates as noted above). From April 2021, an additional 2% surcharge applies to SDLT on purchases of residential property if the buyer is regarded as a “nonresident buyer.” The purchaser is liable to the real estate transfer taxes. Real estate transfer taxes apply at the applicable rates based on the value-added tax (VAT)-inclusive consideration given. In certain cases, the taxes are levied based on the market value of the real estate interest acquired. In the case of grant of a lease, real estate transfer taxes also apply at the applicable rates on the net present value of the rent payable under the lease. Annual tax on enveloped dwellings. Since 1 April 2013, an annual tax on enveloped dwellings (ATED) applies to non-natural persons holding UK residential property (if an individual does not own the residential property directly, but owns it, for example, through a company, this tax may apply). There are various reliefs and exemptions that apply, notably for property developers and property rented out for profit.

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There was an initial valuation date of 1 April 2012, which applied to properties valued at more than GBP2 million owned on or before this date. The regime was extended several times and its current form is that effective from 1 April 2016, properties valued at more than GBP500,000 as of 1 April 2012 (or on purchase if later) are in scope of the ATED. There are fixed revaluation dates whereby property (including property acquired after 1 April 2012) must be revalued every five years from 1 April 2012. A subsequent revaluation occurred on 1 April 2017 and later on 1 April 2022, which is used effective from the ATED year beginning on 1 April 2023. The following are the chargeable amounts of ATED for 1 April 2024 through 31 March 2025. Property value

More than GBP500,000 but not more than GBP1 million More than GBP1 million but not more than GBP2 million More than GBP2 million but not more than GBP5 million More than GBP5 million but not more than GBP10 million More than GBP10 million but not more than GBP20 million More than GBP20 million

Annual charge (GBP)

4,400 9,000 30,550 71,500 143,550 287,500

Prior to 6 April 2019, non-natural persons within the charge of the ATED were also liable to an ATED-related CGT charge at a rate of 28% in relation to certain disposals of a UK property with a value of more than GBP500,000 at a gain (also, see Capital gains tax in Section A). From 6 April 2019, ATED-related CGT has been abolished and disposals of UK residential property are brought within the nonresident CGT and corporation tax regime. Certain reliefs and exemptions from ATED are available (for example, to bona fide property rental businesses, property developers and property traders). Inheritance and gift tax. Inheritance tax (IHT) may be levied on

the estate of a deceased person who was domiciled or deemed domiciled in the UK or who was not domiciled in the UK, but owned assets situated there. An individual who does not have a UK domicile for IHT purposes is taxed only on UK-situated assets and, from 6 April 2017, “UK residential property interests” held via certain non-UK trusts, companies and partnerships. For these purposes, a “UK residential property interest” is widely defined and includes certain loans and collateral provided with respect to UK residential property. A UK domicile is acquired at birth when the individual’s father (if the child’s parents are married at birth) has a UK domicile. An individual may change this by severing all ties with the UK and acquiring a “domicile of choice” elsewhere. Similarly, an individual domiciled outside the UK may acquire a UK domicile of choice by forming an intent to remain in the UK permanently or indefinitely. For IHT purposes, UK domicile is extended to apply to non-domiciled individuals who were resident in the UK for 15

1636 U n i te d K i n g d o m

of the past 20 tax years with effect from 6 April 2017 (previously, 17 out of the last 20 years for the period up to 6 April 2017). Other recent changes include that an individual born in the UK with a UK domicile of origin at birth, who later acquires a nonUK domicile of choice, is treated as being UK domiciled for IHT purposes when the individual resumes UK residence (if the individual has been UK resident for at least one of the two preceding tax years). In addition, there is a “run-off period” during which deemed domicile status for UK IHT purposes endures for a non-UK resident. This applies if deemed domicile status has been acquired under the 15-out-of-20-years rule. Once deemed domiciled, the individual will need to spend at least four UK tax years outside the UK before losing his or her deemed tax domicile status for UK IHT. From 6 April 2025, the government has proposed to reform the inheritance tax treatment of overseas assets. Under the new regime, the inheritance tax treatment of overseas assets will be determined by the residence status of an individual rather than his or her domicile. The inheritance tax rate is 40% for the estate on death. If a will contains a charitable legacy leaving at least 10% of an individual’s estate to charity, this reduces the inheritance tax rate applied to that estate by 10%. This means that the effective tax rate is reduced to 36%. A nil rate band of GBP325,000 applies for 2024-25. Any unused allowance of a spouse or civil partner may be transferred to the second deceased’s estate proportionally, provided the second death occurs after 9 October 2007. Effective from 6 April 2017, a new main residence transferable nil-rate band applies if a “main residence” is passed on to a direct descendant. Broadly, this means a child or grandchild and includes adopted children, foster children and stepchildren. It does not include nieces and nephews. The definition of main residence is very similar to the definition currently applicable to private residence relief for CGT. A property that was never a residence of the deceased such as a buy-to-lease property will not qualify. The allowance was initially set at GBP100,000 in 201718, increasing to GBP125,000 in 2018-19, GBP150,000 in 201920 and to GBP175,000 in 2020-21. The allowance for 2024-25 remains at GBP175,000. A tapered withdrawal of the additional nil-rate band is provided for estates with a net value of more than GBP2 million. The withdrawal rate is GBP1 for every GBP2 over this threshold. IHT is also levied on gifts made by the deceased within seven years before death and on certain other lifetime gifts. Exemptions and deductions are available for inter vivos gifts and for estate transfers at death. Gifts between spouses are exempt, but if the transferor is domiciled in the UK and if the transferee is not domiciled there, the spousal exemption is limited to the same amount as the prevailing nil rate band, which is currently GBP325,000 (GBP55,000 before 6 April 2013). Non-UKdomiciled individuals with UK-domiciled spouses may make an election to be treated as having a UK domicile for IHT purposes

U n i te d K i n g d o m 1637

in order to obtain the full spouse exemption. Inter vivos transfers over the nil rate band into all types of family trusts are subject to IHT at 20%, subject to certain limited exemptions. Taper relief provisions to reduce the IHT payable on gifts made within seven years before death are shown in the following table. Years between gift and death Exceeding Not exceeding

0 3 4 5 6

3 4 5 6 7

Percentage of relief on IHT due

0 20 40 60 80

Business Relief and Agricultural Relief are available at either 100% or 50% on the transfers of certain assets if various conditions are satisfied. To prevent double taxation, the UK has entered into IHT or estate tax treaties with the following jurisdictions. France Netherlands India Pakistan Ireland South Africa Italy

Sweden Switzerland United States

Unilateral relief may also be available. Apprenticeship levy. The apprenticeship levy, effective from

6 April 2017, is a charge on UK employers to fund apprenticeships. It potentially affects all employers across all industry sectors, regardless of whether apprentices are employed. The levy is charged at a rate of 0.5% of an employer’s “pay bill,” which is defined as earnings subject to Class 1 secondary National Insurance contributions (UK employer social security contributions on cash and deemed cash payments, but not on benefits in kind; also, see Section C). All employers receive an annual allowance of GBP15,000 to offset against their levy, meaning that only those employers with a pay bill in excess of GBP3 million per tax year actually have to pay the levy. Groups of connected companies are considered one employer for the purposes of calculating the levy and have only one allowance to cover all of the group companies’ payrolls. Employers need to calculate, report and pay the levy on a monthly basis via the normal payroll process alongside the normal PAYE (see Section D) and National Insurance contribution remittances. The levy, which is an employer charge, cannot be deducted from the earnings of an employee.

C. Social security Contributions. In general, National Insurance contributions are

payable on the earnings of individuals who work in the UK. Special arrangements apply to individuals working temporarily in or outside of the UK. Under certain conditions, an employee is exempt from contributions for the first 52 weeks of employment in the UK or longer if a valid certificate of coverage/A1 is held from a country with which the UK has a current social security agreement.

1638 U n i te d K i n g d o m

The contribution for an employed individual is made in two parts — a primary contribution from the employee and a secondary contribution from the employer. For 2022-23, the employee contribution was increased and was payable at a rate of 13.05% on weekly earnings between GBP190 and GBP967 and at a rate of 3.05% on weekly earnings in excess of GBP967 from 5 April 2022 until 5 November 2022. This increase was reversed by the UK Government with effect from 6 November 2022, and the rates returned to the previously applied 12% and 2%. There will also not be a new National Health Service (NHS) and Social Care Levy introduced from April 2023 as this has also been revoked. For 2022-23, an employer contributes at a rate of 15.05% on an employee’s earnings above GBP175 per week, (with no ceiling) until November 2022 when it reverts to the previous rate of 13.8%. There will also not be a new NHS and Social Care Levy for employers from 2023-24. Exceptionally, the UK government had changed the thresholds at which employee contributions become payable (from 1 July 2022) to reduce the impact of cost-of-living increases. National Insurance contribution rates did not change at this point, but the employee primary threshold increased from GBP190 per week to GBP242 per week for the rest of 2022-23. The reversal of the National Insurance contribution rate from 6 November 2022 did not result in the employee thresholds changing again after 1 July 2022. For 2023-24, the main employee contribution rate remains at 12% on weekly earnings between GBP242 and GBP967 and 2% on any earnings more than GBP967 per week until 5 January 2024, when the main rate then changes to 10% for employees on earnings between GBP242 and GBP967. The 2% rate will then remain unchanged on earnings above GBP967. For 2023-24, an employer contributes at 13.8% on weekly earnings above the secondary threshold of GBP175. Except under certain circumstances related to the exercise of a share option or the award of restricted securities, the employer is not entitled to reimbursement for any secondary contributions made, but these contributions are an allowable expense for purposes of determining the employer’s income tax or corporation tax. Contributions are collected under the PAYE system (see Section D). Since 6 April 2015, employers no longer pay employers’ National Insurance contributions on weekly earnings up to the upper earnings limit (GBP967 for 2021-22) for employees under the age of 21. From 6 April 2016, this exemption from employer National Insurance contributions also applies to apprentices under the age of 25. Employers’ contributions are payable at a rate of 13.8% on weekly earnings above GBP967. Certain reduced rates also apply to war “Veterans” for whom employers no longer pay contributions up to GBP967 per week.

U n i te d K i n g d o m 1639

In addition, certain beneficial rates for employers also exist for employees are working in certain designated “freeport” areas of the UK where employer contributions are not payable on earnings up to GBP481 per week. Employees over the UK new state pension age when earnings are received remain exempt from employee contributions altogether, but their employers continue to pay employer contributions subject to the above provisions. This would have changed with the proposed NHS and Social Care Levy but, as this has been revoked, no employee National Insurance contribution rate is expected to apply to those over the new state pension age unless the government changes National Insurance contribution legislation once again. Employers must also pay National Insurance contributions on the provision of taxable benefits in kind (for example, employerprovided cars or housing). Historically, the rate has always been the same as the employer National Insurance contribution rate in force, but due to the reversal of the increase to National Insurance contribution rates from November 2022, Class 1A contributions will be payable at a blended rate of 14.53% on the cash equivalent of the benefit provided for 2022-23. Again, due the reversal of the National Insurance contribution rate, there will be no correction from April 2023 as the new NHS and Social Care Levy will not enter into force, and accordingly the rate has been reduced back to 13.8% from April 2023. The Class 1A rate for termination payments subject to UK taxation that are paid after 5 November 2022 has also reverted to 13.8% and still needs to be reported via payroll in real time. For 2023-24, the blended rates that applied to directors (who have annual earnings periods) for 2022-23 will change to 11.5% while thresholds revert to those outlined above. Any Class 1B National Insurance contribution payable on items and taxes settled via the PAYE Settlement Agreement return for the 2022-23 tax year that were charged at the blended rate of 14.53% will for 2023-24 revert to the main employer secondary rate of 13.8%. Different rules apply to self-employed individuals. For 2023-24, a weekly Class 2 contribution of GBP3.45 is due if annual profits are expected to exceed GBP12570. In addition, a self-employed individual must make a profitrelated Class 4 contribution on business profits or gains, which is collected, together with income tax. The 2023-24 profit-related contribution rates will revert to the pre-2022-23 rates where 9% is levied on annual profits ranging from GBP12,570 to GBP50,270 and 2% on annual profits more than GBP50,270. This will change with effect from 2024-25 where Class 2 contributions for the self-employed will be abolished and the main rate of Class 4 National Insurance contributions will be reduced to 9% to 8%. Nonresident self-employed individuals are not subject to profitrelated contributions.

1640 U n i te d K i n g d o m

The 2023-24 standard National Insurance contribution rates for employed individuals, effective from 6 April 2023 to 5 January 2024, are set forth in the following tables. Employee’s contributions Total weekly earnings From To GBP GBP

0 242.01 967.01

242.00 967.00 —

Employer’s contributions* Total weekly earnings From To GBP GBP

0 175.01

175.00 —

Contribution rate %

0 12 2 Contribution rate %

0 13.8

* Employer National Insurance contributions are only payable on earnings above GBP967 for employees under the age of 21, apprentices under the age of 25 and qualifying “veterans.” Employer National Insurance contributions are only payable on earnings above GBP481 for employees working in designated UK “freeport areas.”

From 6 January 2024, the employee’s rate between GBP242.01 and GBP967 reduces to 10%, but directors will pay a blended rate of 11.5% on earnings between those two figures for 2023-24. The 2023-24 standard National Insurance contribution rates for employed individuals effective from 6 January 2024 to 5 April 2024 are set forth in the following tables. Employee’s contributions Total weekly earnings From To GBP GBP

0 242.01 967.01

242.00 967.00 —

Employer’s contributions* Total weekly earnings From To GBP GBP

0 175.01

175.00 —

Contribution rate %

0 10 2 Contribution rate %

0 13.8

* Employer National Insurance contributions are only payable on earnings above GBP967 for employees under the age of 21, apprentices under the age of 25 and qualifying “veterans.” Employer National Insurance contributions are only payable on earnings above GBP481 for employees working in designated UK “freeport areas.”

For 2024-25, the Class 1 employee rate between the primary threshold and upper earnings limit is reduced from 10% to 8%. The employer rate and thresholds/bandings did not change as per the following table. Employee’s contributions Total weekly earnings From To GBP GBP

0 242.01 967.01

242.00 967.00 —

Contribution rate %

0 8 2

U n i te d K i n g d o m 1641 Employee’s contributions* Total weekly earnings From To GBP GBP

0 175.01

175.00 —

Contribution rate %

0 13.8

* As per the prior tax year, Employer National Insurance contributions are only payable on earnings above GBP967 for employees under the age of 21, apprentices under the age of 25 and qualifying “veterans.” Employer National Insurance contributions are only payable on earnings above GBP481 per week for employees working in designated UK “Freeport and Investment Zone areas.”

The employer Class 1A and Class 1B National Insurance contribution rates on benefits in kind taxable in the UK and amounts reported through a PAYE Settlement Agreement (PSA) respectively remain at 13.8% throughout the 2024-25 UK tax year. For 2025-26, there is no change to the Class 1 employee National Insurance contribution rate nor to the threshold at which contributions become payable. The Employer National Insurance contribution rate will increase to 15% from April 2025 and this will apply to earnings over GBP96 per week as shown in the table below (note that Employer Class 1A and Class 1B National Insurance contributions will be levied at the same rate). Employee’s contributions* Total weekly earnings From To GBP GBP

0 96.01

96.00 —

Contribution rate %

0 15

* As per the prior year, Employer National Insurance contributions are only payable on earnings above GBP967 for employees under the age of 21, apprentices under the age of 25 and qualifying “veterans.” Employer National Insurance contributions are only payable on earnings above GBP481 per week for employees working in designated UK “Freeport and Investment Zone areas.”

Employers can reclaim a percentage of the increase back by way of the “employment allowance,” which is limited to GBP10,500 per year. The UK also has a voluntary National Insurance scheme that can be accessed by certain individuals if set criteria are met. This can assist individuals in maintaining access to the UK contributionbased benefits system notably for New State Pension entitlements. The following two rates remain in force for the 2024-2025 tax year: • Voluntary Class 2: GBP3.45 per week • Voluntary Class 3: GBP17.45 per week The Class 2 rate is generally applicable to those working overseas who have fallen out of mandatory Class 1 National Insurance contribution. The Class 3 rate applies to those not in employment and not claiming benefits. Generally, payments can be made for up to six years after the tax year in question, but the UK currently offer a concession to those with gaps in their UK NIC records dating back to 2006 that permits payments to be backdated over that longer period up to and including 5 April 2025 (although higher rates of National Insurance contributions may be imposed where paid late).

1642 U n i te d K i n g d o m

Individuals are still expected to be able to pay Class 2 voluntary National Insurance contributions for periods after 6 April 2025, but clarity is being sought on whether this can apply to individuals working overseas who have fallen outside the mandatory Class 1 National Insurance contribution system. Totalization agreements. From 1 January 2021, contribution lia-

bility for employees and self-employed individuals moving to or from the UK varies, depending on whether the individual is covered by the old EC social security legislation by virtue of the UK/European Union (EU) Withdrawal Agreement (WA) (and equivalent Citizens Rights Agreement [CRA]/Separation Agreement [SA] with Switzerland and the EEA countries), the new social security legislation in the UK/EU Trade and Cooperation Agreement (TCA) or a reciprocal agreement, or whether the assignment is to or from a country with which the UK has not entered into a social security agreement. Each of these categories is discussed below. EC social security legislation. EU social security legislation (EEC Council Regulation No. 883/2004) is effective from 1 May 2010 until 31 December 2020 and beyond for certain individuals covered by the WA, CRA or SA. This legislation applies to all inter-EU moves for EU nationals. This legislation covers moves to Switzerland, effective from 1 April 2012, and moves to Iceland, Liechtenstein and Norway, effective from 1 June 2012. However, the UK did not extend the application of EEC Council Regulation No. 883/2004 to non-EU nationals. The previous EU legislation (EEC Council Regulation No. 1408/71) continues to apply to non-EU nationals if grandfathering under the WA is in point (although the new TCA will apply to such individuals). Under the old EU legislation, a covered worker normally pays social security contributions in a single member country, usually the country where his or her employment duties are performed, even though he or she may not live there. Under an exception to this rule, a worker seconded to work in the UK from another Member State normally remained subject to social security contributions in his or her home country if the assignment was for 12 months or less (if Regulation 1408/71 applied) or 24 months or less (if Regulation 883/2004 applied). Individuals may remain in their home country scheme for significantly longer periods if they are deemed to work partly in more than one Member State (multistate workers), or if they are considered special cases by virtue of specific skills or knowledge. Cessation of UK membership in the EU (Brexit). Effective from 1 January 2021, the UK and the EU only (see information regarding the EEA and Switzerland below) are subject to new rules under the UK/EU TCA. As under the old rules, a covered worker normally pays social security contributions in a single member country only, and this is usually the country where his or her employment duties are performed, even though he or she may not live there. Under the new rules, exceptions to that principle still apply but are somewhat diluted in comparison to the old rules.

U n i te d K i n g d o m 1643

A worker seconded to work in the UK from an EU Member State will only remain subject to social security contributions in his or her home country if the assignment is for 24 months or less. Under the new provisions, individuals moving between the UK and an EU Member State may no longer remain in their home country social security scheme for periods expected to exceed 24 months at the outset or for periods that are extended beyond 24 months. The only exception to this measure is for workers who work partly in the UK and another EU Member State (multistate workers) for which the old rules are mainly carried forward. These new rules do not apply to the EEA countries, which are Iceland, Liechtenstein and Norway, or Switzerland. In the interim, until 31 December 2023, moves between the UK and Iceland and Norway are covered by the old bilateral agreements that the UK has with these countries, and Liechtenstein will be treated as a non-agreement country and, until October 2021, Switzerland was subject to the old UK/Switzerland bilateral agreement. These old agreements generally have “detached” worker provisions, but not all are as generous as the old EU rules. In the case of Norway (and Switzerland pre-1 November 2021), no multistate provisions exist. This is expected to cause some issues in the interim period. It is expected that, as a result of signing the TCA, the UK’s old bilateral agreements with the EU states (other than with the Republic of Ireland; see below) will continue to be dormant other than where specifically provided for within the new TCA (or old EU regulations where the WA or equivalent applies). In addition, the UK had already arranged a new agreement with the Republic of Ireland, which broadly replicates the terms of the old EU social security regulations and which will take effect if the new TCA provisions are not as beneficial as those rules or grandfathering under the WA is not in point. A new agreement has since been reached with Switzerland. Effective from 1 November 2021, this replicates much of the UK-EU TCA but does contain an “exceptions clause” as per the old EC Regulations. However, this may still result in issues for UK nationals who work in the UK, Switzerland and any other EU Member State simultaneously. It appears that this completely revokes the old UK-Swiss bilateral agreement from 1968, so there are no transitional provisions from old to new and revised certification may be required for anyone currently subject to the 1968 agreement. The UK authorities have recently confirmed that the new Convention on Social Security Coordination between Iceland, the Principality of Liechtenstein, the Kingdom of Norway and the United Kingdom of Great Britain and Northern Ireland (Convention; an EEA-wide agreement) has been implemented between the UK and the EEA, with effect from 1 January 2024. This new Convention (which has only recently been published in its entirety) also appears more akin to the old EC Regulations than the new TCA as it contains provisions for “posted workers”

1644 U n i te d K i n g d o m

and “multi-state workers” and has an “exceptions clause” and an “employer reporting obligation provision.” In summary, there are certain elements that are more beneficial than those contained in the old social security agreements applicable from 1 January 2021, but others are not as beneficial as, for example, the old provisions within the old 1990 UK/Norway social security agreement as far as the posting of workers is concerned. While it appears that this Convention will now supersede all previous bilateral or multilateral agreements (subject to the WA provisions) that existed, there are limited “grandfathering provisions” from the prior agreements where those provisions are more beneficial (see the reference to Norway above) that can continue to apply. Whether this new agreement mirrors the EU/ UK TCA or is more aligned to the old EC Regulation 883/04 and the new Swiss agreement remains to be seen. One further consideration within the new Convention that is not provided for within many of the UK’s other social security agreements, the UK/EU TCA or the old EC Regulations, relates to workers who operate on either the UK and Norwegian “Continental Shelf ” who are involved in exploration or exploitation of the “natural resources” of the seabed of those “designated areas.” This group of workers did have specific provisions applicable to social security liability contained within the 1990 UK/Norwegian social security agreement, but these have been amended slightly within the new Convention. As a result, companies operating in that sector and those “designated areas” will need to be aware of the changes for any individuals who do not have “grandfathered rights” under the old UK/Norway agreement. WA impact. As mentioned above, the UK and the EU entered into a legally binding Brexit WA (equivalents with EEA and Switzerland) to protect the rights of citizens currently working or residing in an EU Member State or in an EEA country or Switzerland as of 31 December 2020. Given the more limited nature of the TCA in terms of geographical coverage and periods of home country coverage that will now be available, it is imperative that businesses assess the applicability of the WA in terms of any post-1 January 2021 cross-border activities that include the UK, as the WA and equivalents may provide access to a more beneficial social security position. Reciprocal agreements. The UK has reciprocal social security agreements with several non-EEA countries, although the terms of the agreements vary. Therefore, to determine an individual’s liability or benefit entitlement, it is important to consult each agreement relating to the individual’s home/host country. To prevent double social security taxes and to assure benefit coverage, the UK has entered into reciprocal agreements with the following jurisdictions. Barbados Bermuda Canada Chile

Isle of Man Israel Jamaica Japan

Mauritius Philippines Switzerland Türkiye

U n i te d K i n g d o m 1645

Gibraltar Guernsey

Jersey Korea (South)

United States Yugoslavia*

* The UK honors the Yugoslavia treaty with respect to Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia. The EC social security rules have applied to Slovenia since 1 May 2004 and to Croatia since 1 July 2013.

In the interim, the old agreements with Iceland and Norway also apply in certain scenarios when cross-border activity with the UK commences on or after 1 January 2021, until 1 January 2024 when the new Convention on Social Security Coordination between Iceland, the Principality of Liechtenstein, the Kingdom of Norway and the United Kingdom of Great Britain and Northern Ireland (an EEA-wide agreement) is implemented (see above). A new social security agreement has been signed between the UK and Gibraltar with effect from 1 June 2024. This supersedes the previous application of EC Regulation 883/04 (which had still applied solely between the UK and Gibraltar post Brexit) but it is equivalent in scope to those old EC Regulations and the UK’s new agreements with Switzerland and the EEA/European Free Trade Association (EFTA) countries. However, no new agreement has been reached between Gibraltar and the EU post Brexit. Without reciprocal agreement. If no reciprocal agreement exists between the home country of an individual and the UK, the individual is subject to both the domestic law of his or her home country and the domestic law of the UK. For these individuals who come to work temporarily in the UK, exemption from payment of certain contributions for the first 52 weeks of their stay is common. The exemption depends on both the employee and the employer meeting various requirements. For individuals leaving the UK to work overseas who remain employed by a UK company, there is generally a continuing liability to mandatory Class 1 (employee and employer) National Insurance contributions for a period of 52 weeks from the date of departure from the UK. Other considerations may be appropriate if directors or “office holders” attend UK board meetings or otherwise undertake UK duties, if rotational workers from the UK are concerned or if individuals break or do not break UK tax residency. Special rules can also apply to mariners, air crews and those who work in oil and gas exploration on the UK continental shelf. UK National Insurance contributions compliance and reporting. If

an individual or employer remains or becomes liable for UK Class 1 (employee and employer) National Insurance contributions, this is normally assessed on worldwide earnings (income) from the employment(s) concerned and must be reported in UK payroll each pay period under the UK’s Real Time Information (RTI) process. Also, see Advance payment of taxes regarding PAYE in Section D.

D. Tax filing and payment procedures General. The tax year for individuals in the UK runs from 6 April

to 5 April of the following year.

1646 U n i te d K i n g d o m

Whether compensation is subject to UK tax and how it is taxed depend on the employee’s residence status at the time the compensation is earned. Taxable compensation is actually taxed in the year of receipt. Earnings, including bonuses and commissions earned in one year but not paid until a subsequent tax year, are taxed when received. For example, if an individual receives a salary of GBP30,000 during the year ending 5 April 2025, and earns a bonus of GBP20,000 for that tax year that is not paid until December 2025, the salary is subject to tax in 2024-25, but the bonus, earned in the same period as the salary, is subject to tax in 2025-26, when it is received. The term “receipt” is broadly defined for this purpose and includes payment as well as entitlement to payment. The payment does not have to be made to the employee; for example, a payment of an employee’s earnings to an employee’s family remains taxable. Married persons are taxed as separate individuals. Spouses are responsible for their own tax returns, are assessed on their own income and gains, and are given tax relief for their own allowable deductions and allowances. Individuals are entitled to their own tax-band rates and capital gains tax exemptions. Income from jointly held assets is divided equally between spouses and taxed accordingly. However, if a husband and wife are beneficially entitled to unequal shares of an investment in certain property and to the resulting income, or if either spouse is beneficially entitled to the capital or income to the exclusion of the other, a declaration may be made to HMRC to ensure that the income is assessed according to its beneficial interest. Advance payment of taxes. Income tax and social security contri-

butions on cash earnings are normally collected under the PayAs-You-Earn (PAYE) system. All employers must use the PAYE system to deduct tax and social security contributions from wages or salaries. Although expense reimbursements and many noncash benefits are not normally subject to PAYE withholding, they must be reported to HMRC by employers after the end of the tax year and by employees on their tax returns. HMRC may also take them into account in determining the employee’s PAYE tax code, which in turn adjusts the amount of tax to be deducted from the employee’s cash pay. Alternatively, employers may agree with HMRC that most benefits in kind may be subject to payroll withholding rather than reported separately after the end of the tax year. It is proposed that from 6 April 2026, all benefits in kind apart from the provision of living accommodation and beneficial loans will be subject to PAYE. Tax returns. The UK has a self-assessment tax system. Under the

self-assessment system, individuals who receive a notice to file a tax return from HMRC may choose to have HMRC calculate and assess their tax liability or to calculate and assess the tax due themselves. Individuals who choose to have HMRC calculate and assess tax must complete and submit their tax returns by 31 October following the end of the tax year. Individuals who choose to calculate and assess tax themselves must complete and submit

U n i te d K i n g d o m 1647

tax returns by 31 October following the end of the tax year if they want to file paper returns. Returns can be filed electronically, together with a calculation of the tax due, up to 31 January following the end of the tax year. If tax is due as calculated on the return, it must be paid by 31 January following the end of the tax year. Provisional on account payments of tax on income not subject to withholding are usually payable in two installments, on 31 January in the tax year and on the following 31 July. Each installment must equal 50% of the previous year’s income tax liability not withheld at source. Interest is automatically charged on tax not paid by the due dates. A 5% penalty is also imposed if the tax is not paid within 30 days after the final payment date. A further penalty of 5% is imposed if the tax is not paid within six months following the final payment date. An additional penalty of 5% is imposed if the tax is still not paid within 12 months following the final payment date. A fixed penalty of GBP100 is imposed if a return is not filed by the applicable deadline (that is, 31 October or 31 January) even if no tax is due. If the return is three months late, HMRC may seek to impose daily penalties of GBP10 a day for a period of up to 90 days (GBP900 per return). A further fixed penalty of the higher of GBP300 or 5% of the tax due is imposed if the return is six months late. An additional penalty, which can be up to 200% of the tax due, is imposed if the return is 12 months late, if it involves overseas issues and if facts are deliberately concealed. Penalties also apply to incorrect returns. Individuals who are not subject to tax withheld at source and who do not receive a notice to file a tax return must inform HMRC by 5 October following the end of the tax year if they are likely to have a UK tax liability for the tax year concerned. Individuals with simpler tax affairs may receive an assessment of their tax liability from HMRC, which negates the requirement to file a tax return. This would not normally apply to non-UK domiciled individuals and individuals working in more than one country. In addition, from 6 April 2026, it is proposed that individuals with self-employment income and/or property income will be required to keep digital records and report details of income and expenses on a quarterly basis if the income is over GBP50,000. Full details of the individuals who will be within this regime are not yet available. Capital gains tax. Capital gains are generally reported on the self-

assessment tax return, and any CGT due must be included with the final payment of tax for the year. An exception is that disposals of UK land should be reported and any tax paid within 60 days after disposal. An additional reporting requirement, the NRCGT return, also applies with respect to disposals of UK residential property by nonresidents up to 5 April 2020 (see Disposal of UK residential property by nonresidents in Capital gains tax in Section A). From 6 April 2020, however, individuals need to report and pay nonresident Capital Gains Tax using the Capital Gains Tax on UK property service.

1648 U n i te d K i n g d o m Inheritance tax. Inheritance tax is usually payable by the

deceased’s personal representative when probate (confirmation of the estate) is obtained. Some liabilities, however, must be paid by trustees of settled property and by recipients of lifetime gifts.

E. Double tax relief and tax treaties If income is doubly taxed in two or more jurisdictions, relief for double taxation is typically available through a foreign tax credit or exemption. In the absence of a treaty with the country imposing the foreign tax, unilateral relief may be claimed under UK domestic law. However, to claim relief, it is essential that the income be regarded as foreign source under UK law and arise from sources in the jurisdiction imposing the tax. The taxpayer also usually needs to be resident in the UK unless he or she has an ongoing liability for UK taxes as a nonresident (for example, because he or she is a Crown employee). The relief usually takes the form of a foreign tax credit if an individual is resident in the UK for the purpose of a double tax treaty. In this case, any foreign taxes paid on doubly taxed income arising from sources in the other jurisdiction can be taken as credit against the UK tax liability on the same source of income. The credit that can be claimed is limited to the lesser of the foreign taxes paid or the amount of equivalent UK tax on the doubly taxed income. If an individual is resident in the UK and treaty-resident in a jurisdiction with which the UK has entered into a double tax treaty, a claim may be made in the UK to exempt from UK tax the income that would otherwise be taxed in both jurisdictions if the treaty contains the relevant articles. The UK has entered into double tax treaties covering taxes on income and capital gains with the following jurisdictions. Albania Greece Algeria Grenada Antigua and Guernsey Barbuda Guyana Argentina Hong Kong Armenia Hungary Australia Iceland Austria India Azerbaijan Indonesia Bahrain Ireland Bangladesh Isle of Man Barbados Israel Belarus Italy Belgium Jamaica Belize Japan Bolivia Jersey Bosnia and Jordan Herzegovina Kazakhstan Botswana Kenya British Virgin Islands Kiribati Brunei Darussalam Korea (South) Bulgaria Kosovo Canada Kuwait

Norway Oman Pakistan Panama Papua New Guinea Philippines Poland Portugal Qatar Romania Russian Federation San Marino Saudi Arabia Senegal Serbia Sierra Leone Singapore Slovak Republic Slovenia Solomon Islands South Africa Spain Sri Lanka

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Cayman Islands Chile China Mainland Colombia Côte d’Ivoire Croatia Cyprus Czech Republic Denmark Egypt Estonia Eswatini Ethiopia Falkland Islands Faroe Islands Fiji Finland France Gambia Georgia Germany Ghana Gibraltar

Kyrgyzstan Latvia Lesotho Libya Liechtenstein Lithuania Luxembourg Malawi Malaysia Malta Mauritius Mexico Moldova Mongolia Montenegro Montserrat Morocco Myanmar Namibia* Netherlands New Zealand Nigeria North Macedonia

St. Kitts and Nevis Sudan Sweden Switzerland Taiwan Tajikistan Thailand Trinidad and Tobago Tunisia Türkiye Turkmenistan Tuvalu Uganda Ukraine United Arab Emirates United States Uruguay Uzbekistan Venezuela Vietnam Zambia Zimbabwe

* The 1962 South Africa treaty applies to Namibia (formerly known as South West Africa).

The UK has agreed to tax treaties with Brazil, Ecuador and Peru, but these treaties are not in force because they have not yet been ratified by the governments of the jurisdictions. Belarus has suspended the provisions of the UK-Belarus double tax treaty. HMRC has stated that the UK-Belarus double tax treaty does not permit this unilateral action, and Belarus has been asked to reverse its action. The UK considers the treaty to remain in force and is continuing to comply with its terms. The government is considering its next steps and will provide more information in due course.

F. Entering the UK Brexit. The UK left the EU on 31 January 2020. Freedom of

movement ended on 31 December 2020. The rights of EU nationals who were residing in the UK on or before 31 December 2020 remain the same subject to applying for status under the EU Settlement Scheme (EUSS). EUSS. In line with the Citizens’ Rights Agreement, the EUSS was established to enable EU, EEA and Swiss citizen residents in the UK by the end of the transition period on 31 December 2020, and their family members, to get the immigration status they need to continue to work, study and access benefits and services, such as health care, in the UK after 30 June 2021. For those citizen residents in the UK by 31 December 2020, the deadline for applications to be made to the EUSS was 30 June 2021, which was also the end of the grace period during which their existing EU law rights were protected pending the outcome of an application to the EUSS made by the deadline. Since 1 July 2021, EU, EEA and Swiss citizens and their family members have to evidence their right to be in the UK by having

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a valid UK immigration status. If they do not hold indefinite leave to enter or remain, they can obtain the status they need through the EUSS if they were resident in the UK by 31 December 2020, or are a joining family member of an EU, EEA, or Swiss citizen who was resident in the UK by then. Alternatively, they may be able to obtain a valid visa under the points-based immigration system. Individuals who did not apply under the EUSS by the deadline can make a late application if they can show they have reasonable grounds for missing the deadline. Settled status. EU nationals who started living in the UK by 31 December 2020 and who have lived in the UK for a continuous five-year period (known as “continuous residence”) will be granted settled status. This status will allow individuals to remain in the UK indefinitely and apply for British citizenship if eligible. The status will be lost if individuals spend more than five consecutive years outside the UK. Pre-settled status. EU nationals who started living in the UK by 31 December 2020 but who have not yet lived in the UK for a continuous five-year period will be granted pre-settled status. This status will be issued for a five-year period. After spending five years continuously in the UK, the individual can apply for settled status. Pre-settled status will be lost if individuals spend more than two consecutive years outside the UK. General principles. In general, to enter the UK, you must have a

valid travel document (in most cases, a passport).

Regardless of the duration or purpose of their visit, nationals of certain countries must obtain entry clearance (a visa) before traveling to the UK. Individuals from the relevant countries are known as “visa nationals.” In contrast, “non-visa nationals” are not required to obtain entry clearance if traveling to the UK as visitors or business visitors (performing certain permissible activities) for a period not exceeding six months. If the purpose of the visit is for employment or study, all nonBritish/Irish nationals must obtain appropriate entry clearance (a visa) before traveling to the UK. Entry clearance applications must be made to a British Embassy, Consulate General or High Commission (collectively known as British diplomatic posts) through one of the UK’s Commercial Partners’ offices in the individual’s home country or country of legal residence. Applications for entry clearance may be refused if the applicant has breached UK immigration rules during the preceding 10 years. Providing misleading or false information when applying for entry clearance or leave to enter may result in an individual being barred from entering the UK for up to 10 years. A British diplomatic post approving entry clearance for longer than six months may stipulate that the individual must register with the police within seven days of arriving in the UK. Nationals

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of EEA or Commonwealth counties are not required to register with the police. UK authorities may impose financial penalties on airlines and shipping companies that bring unauthorized passengers to the UK. This legislation was introduced to reduce the number of persons who are turned away at the port of entry because they do not have the necessary visa. The UK government has introduced an Immigration Health Surcharge (separate from the visa fee). The surcharge is payable by non-EEA migrants coming to the UK for more than six months. The surcharge is currently set at GBP1,035 per year for the main applicant and each dependent who is 18 or older, and GBP776 per year for children younger than 18, students, dependents of students and Youth Mobility Scheme Visa applicants. Since 1 January 2021, EU nationals applying under the new immigration system (see New immigration system from 1 January 2021) are also required to pay the surcharge. Visitors. Individuals coming to the UK as tourists or business

visitors are normally granted admission for a period of six months. The rules regarding business visitors are complex and should be considered on a case-by-case basis. In general, business visitors are prohibited from working while in the UK or receiving a salary in the UK. However, they are allowed to attend meetings, transact business and negotiate contracts with UK companies. It is advisable that an individual planning to come to the UK as a business visitor carry a letter from his or her employer stating the purpose and duration of the visit. The UK government has identified specific categories of individuals who are permitted to perform paid activities in the UK. They are allowed to perform “work” for which they can receive payment, but only for a period of up to one month. These categories are visiting academic examiners, lecturers, pilot examiners and advocates/lawyers, and activities related to the arts or entertainment. Academic visitors who are experts in their field can extend their stay in the UK to a total of 12 months. Visa nationals coming to the UK must obtain entry clearance before traveling to the UK. Although non-visa nationals coming to the UK as visitors for up to six months do not require entry clearance, they must restrict their activities to those prescribed and permitted under the business visitor rules.

G. Entry for the purposes of employment, self-employment, studying, government-exchange program and other purposes Under the Immigration Act of 1971 and the British Nationality Act of 1981, certain individuals have right of abode, which in most cases entitles the bearer to live and work in the UK without restriction. These acts preclude the necessity for entry clearance for certain qualified individuals. Individuals who do not have right of abode and who wish to live and work in the UK must apply for the appropriate immigration document and/or entry clearance (visa). Whether a combination of these items is required depends on the individual’s circumstances.

1652 U n i te d K i n g d o m EEA and Swiss nationals. The EEA consists of the following

countries.

Austria Belgium Bulgaria Croatia Cyprus Czech Republic Denmark Estonia Finland France

Germany Greece Hungary Iceland Ireland Italy Latvia Liechtenstein Lithuania Luxembourg

Malta Netherlands Norway Poland Portugal Romania Slovak Republic Slovenia Spain Sweden

Freedom of movement between the UK and the EU ended at 11:00 p.m. on 31 December 2020. Nationals of EEA countries entering the UK will need to apply under the immigration system (see Section F). The governments of the UK and Ireland have committed to ensure that there will be no changes to the rights enjoyed by Irish nationals in the UK and UK nationals in Ireland. Irish citizens continue to have a right to live and work in the UK without restriction. Individuals without the right of abode. In general, all non-British/

Irish nationals, and persons without settled status or a right of abode who wish to come to the UK for the purpose of employment must obtain the requisite entry clearance for that purpose before traveling to the UK. The UK’s Points Based System (PBS) is a points-scoring system under which applicants are awarded points to reflect earnings, experience and the demand for skills in certain sectors. Illegal working legislation has increased the penalties for employers who breach the requirements. These measures are aimed at strengthening the government’s ability to control immigration more effectively. The Global Talent category is intended for individuals who are internationally recognized in their field as either a recognized leader or an emerging leader in their field. The Global Talent route replaced the Tier 1 (Exceptional Talent) route, which was closed for new applicants from 20 February 2020. Every initial application must be endorsed by a “designated competent body” before a visa application can be made. The Start-up and Innovator Founder categories require an endorsement by an approved body, which will assess whether an individual’s business idea is new and viable and has potential for growth. The Start-up category is available for those looking to set up a business in the UK and permits a stay for up to two years without the option of extension. The Innovator Founder category is available for those wishing to set up and invest funds into a business and initially permits a stay for three years with the option to extend for further three-year periods with the potential to apply for settlement after five years. Business organizations with a history of supporting UK entrepreneurs may be eligible to apply to become endorsing bodies.

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The Tier 1 (Entrepreneur) category was closed to applications to enter the scheme on 28 March 2019. However, the category, which applies to individuals who intend to invest in the UK by setting up or taking over the running of a UK business, is still open to those eligible to extend their visa. The Skilled Worker Visa category applies to skilled workers with a licensed sponsor that has offered them a job in the UK. A key feature is that employers must obtain a sponsor license in order to sponsor all overseas nationals coming to the UK. Sponsors are required to estimate their use of Certificates of Sponsorship (CoS) in different categories on an annual basis. They are also subject to reporting and compliance requirements to maintain their status as licensed sponsors. Applications can be submitted from within the UK if permissible (for example, extensions’ applications for existing Tier 2 migrants, students, individuals seeking to change employment, and those switching from applicable immigration categories to Skilled Worker Visas) or from outside the UK. The skill level for the job is set at RQF Level 3 (equivalent to A-Level) or above. Except for nationals from a handful of majority-English-speaking countries, individuals who wish to work in the UK as a Skilled Worker must provide specified documents to show that they have a good knowledge of English of at least Level B1 on the Common European Framework of Reference for Languages (CEFR) scale. The minimum salary requirement for roles in this category is currently GBP38,700 or the occupation code minimum (whichever is higher) per year for experienced workers and GBP30,960 for new entrants. Salaries must also meet the minimum set out in the relevant Standard Occupation Classification (SOC) Code published by UK Visas and Immigration. There is also a maintenance requirement to be met if the individual’s sponsor does not certify the maintenance associated with the individual’s application. The initial Skilled Worker Visa is granted for up to five years. The rules allow unlimited extensions of up to five years at a time. Once a migrant has spent a continuous period of five years in the UK as a Skilled Worker, he or she is eligible to apply for indefinite leave to remain provided that he or she meets the requirements at the time of application. The Global Business Mobility (GBM) visa category has five subcategories, which are the Senior or Specialist Worker, Graduate Trainee, Expansion Worker, Service Supplier, and Secondment Worker. The GBM Senior or Specialist Worker subcategory applies to overseas employees of multinational companies who are being transferred to a UK-based branch of the organization. These employees must have normally worked abroad with the company for at least 12 months unless their salary is at least GBP73,900, in which case this requirement is waived. Individuals who enter the UK under this category must fill roles at RQF Level 3 (graduate level or above). The minimum annual salary threshold for this category is GBP48,500. Individuals must also receive at least the minimum salary specified in the relevant SOC Code for

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their particular occupation. Individuals are not required to demonstrate English-language ability for the GBM category. Individuals earning GBP73,900 and above can stay in the UK for up to nine years in any 10-year period. Those earning less can stay for up to five years in any six-year period. The Graduate Trainee subcategory applies to recent graduate employees of multinational companies with at least three months of overseas’ service who are being transferred to the UK-based branch of the organization as part of a structured graduate training program for no more than 12 months. Only 20 graduate trainee visas may be issued per sponsor per financial year. Graduate Trainees must be paid a minimum salary of GBP25,410 per year, or the minimum salary threshold as specified in the relevant SOC Code, whichever is higher. UK employers are required to pay an Immigration Skills Charge (ISC) for employing Skilled Worker and GBM migrants with some exceptions. The exact amount depends on the size of the organization and how long the worker will be employed. For large sponsors, this amount is GBP1,000 per person per year. The Expansion Worker subcategory applies to representatives of an overseas business. It is for a business to introduce its products into the UK market by bringing senior-level overseas employees to the UK to set up operations. To obtain entry clearance as a representative, an individual must prove that he or she will be a representative of a particular overseas company in the UK. He or she must also demonstrate that a need exists for his or her presence in the UK and that it is his or her intention to establish a subsidiary or branch of the foreign company after entering the UK. A representative must remain under the direct control of the overseas company. Initially, entry clearance is usually granted for up to three years. After this period, the individual can apply for an extension if certain criteria are met. Indefinite Leave to Remain (ILR; see Section H) is also possible after five years, subject to meeting further eligibility criteria. The Expansion Worker subcategory is for overseas workers who are undertaking temporary work assignments in the UK, if the worker is either a contractual service supplier employed by an overseas service provider or a self-employed independent professional based overseas and if he or she needs to undertake an assignment in the UK to provide services covered by one of the UK’s international trade agreements. The Secondment Worker subcategory is for overseas workers who are undertaking temporary work assignments in the UK if the worker is being seconded to the UK as part of a high-value contract or investment by his or her employer overseas that is valued at over GBP50 million. The Minister of Religion Visa category applies to individuals coming to the UK as religious workers for religious organizations. Individuals coming to the UK under this category are required to meet the English language requirement at CEFR Level B2.

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The Sportsperson Visa category applies to elite sportspersons and qualified coaches who are internationally established at the highest level and will make a significant contribution to the development of their sport. Individuals coming to the UK under this category are required to meet the English language requirement at CEFR Level A1 in speaking and listening. The Student Visa category covers individuals wishing to study in the UK. Such individuals must be sponsored by a licensed educational institution in the UK and meet the English language and maintenance requirements. Temporary Worker Visa routes covers the following temporary workers: • Individuals coming to the UK to work or perform as sportspersons, entertainers or creative artists • Individuals coming to the UK to do voluntary work for charity • Individuals coming to the UK to work temporarily as religious workers • Individuals coming to the UK through Government Approved Exchange Programs for the purposes of internships or work experience • Individuals coming to the UK under a contract to do work that is covered under international law This visa route also covers young people (aged from 18 years to 30 years) from participating jurisdictions who would like to experience life in the UK under the Youth Mobility Scheme for up to two years. Each jurisdiction has an annual allocation of places under the Youth Mobility Scheme. The following is the current list of jurisdictions: • Australia • Canada • Japan • Hong Kong • Korea (South) • Monaco • New Zealand • San Marino • Taiwan The Frontier Worker Permit allows EEA nationals to work in the UK but live in another country. This category is appropriate for individuals who began working in the UK by 31 December 2020 and must usually have worked in the UK at least once every 12 months since they started working in the UK. The British National Overseas Visa allows those residing in Hong Kong who are British Nationals (Overseas) to come to the UK to live, work and study. Such individuals must be over the age of 18 and meet a maintenance requirement. Permit-free employment categories. Individuals who fall into

certain categories do not need permission to work in the UK but must obtain prior entry clearance from a British diplomatic post before entering the UK. These include the following: • A Commonwealth citizen with a British-born parent or grandparent may be given permission to live and work in the UK for

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five years. At the end of this period, the individual may be eligible to apply for Indefinite Leave to Remain (ILR; see Section H) in the UK. • An individual coming to the UK as a representative of a foreign government or as an employee of the United Nations or another international organization.

H. Indefinite Leave to Remain If an individual has been living and working in the UK continuously for five years with valid leave in a relevant immigration category, he or she and his or her dependents may be eligible to apply for Indefinite Leave to Remain (ILR). An individual who has obtained leave as the partner of a British citizen or person settled in the UK must reside in the UK continuously for five years before he or she qualifies for ILR. ILR status removes the time and employment restrictions that were imposed when an individual first entered the UK. This means that the individual may be able to settle permanently in the UK and take up any employment. The individual is free from immigration restrictions. An individual can retain his or her ILR status during a period of absence if he or she is not away from the UK for a continuous period of more than 24 months and if he or she retains close ties with the UK during his or her absences; that is, when the individual returns to the UK, he or she is returning to reside, not to visit.

I. Family and personal considerations Family members. The dependent family members admitted to the

UK under most categories are admitted for the same period as the main applicant and are eligible to take up employment. Subject to some restrictions, dependents generally include the permit holder’s spouse, unmarried or civil partner and children under than 18 years of age. However, dependents must obtain entry clearance before accompanying the principal applicant to the UK. The spouse or civil partner and dependents (including children under 21 years of age, parents and grandparents) of an EEA national or a Swiss national living in the UK by 31 December 2020, regardless of whether they are EEA or Swiss nationals themselves, and who are applying for an EEA Family Permit or EU Settlement Scheme Permit are also granted entry rights, including the right to work for an initial period of six months. On entry into the UK, they may apply under the EU Settlement Scheme (see EU Settlement Scheme in Section F). The UK immigration rules contain provisions to accommodate non-EEA family members of British citizens. However, such applications should be assessed on a case-by-case basis. Individuals are typically issued entry clearance for a period of 33 months with the option to extend this status from within the UK and make an application for ILR on the completion of five years’ continuous lawful residence in the UK.

U n i te d K i n g d o m 1657 Driver’s permits. Most foreign nationals may drive legally in the

UK with their home jurisdiction driver’s licenses for 12 months. After 12 months, foreign nationals must either exchange their license for a UK license or apply for a provisional driving license and then pass the theory and practical driving tests to continue driving in the UK.

J. Other matters British citizenship. In certain circumstances, an individual may

be eligible to apply to naturalize as a British citizen after a continuous period of five years’ residence in the UK, the last 12 months of which must have been as a holder of ILR. In most cases, an individual should be eligible for naturalization after a continuous period of residence of six years in the UK (five years to obtain ILR and one further year free of immigration conditions). An individual married to a British citizen may be able to apply to naturalize as a British citizen if he or she has continuously resided in the UK for three years and is a holder of ILR at the time the application is made. In practice, because the partner of a British citizen can now only obtain ILR after five years, it still takes five years to qualify for naturalization in most circumstances. The UK allows dual nationality. However, not all countries allow dual nationality. Consequently, this should be confirmed before making an application. Identity cards for non-EEA nationals. The government has intro-

duced identity cards (Biometric Residence Permits, or BRP cards) for foreign nationals in the UK. BRP cards replace the stickers or vignettes in passports. Identity cards have now been introduced for all migrant worker categories, applications for ILR and applications for leave as an unmarried partner, same-sex partner or spouse. Individuals granted entry clearance now receive a vignette in their passport valid for 90 days and are required to collect their BRP cards from a participating post office in the UK on arrival. Tuberculosis testing. Individuals resident in certain countries who

are coming to the UK for more than six months are required to have a tuberculosis (TB) test. An individual is given a chest X-ray to test for TB. If the result of the X-ray is not clear, the individual may also be asked to give a sputum sample (phlegm coughed up from the lungs). If the test shows that the individual does not have TB, he or she is given a certificate that is valid for six months. This certificate must be included with the UK visa application. A TB test is not required for the following individuals: • Diplomats accredited to the UK • Residents of the UK who are returning within two years of leaving • Holders of certificates of entitlement (right of abode in the UK) for more than six months who are applying for another visa within six months of leaving their country of residence All children must see a clinician who decides if they need a chest X-ray. Children under 11 will not normally have a chest X-ray. A

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parent must take his or her child to an approved clinic and complete a health questionnaire. If the clinician decides the child does not have TB, the clinician gives a certificate to the parent. This certificate must be included with the child’s UK visa application.